Be here. I thought I would open with a few comments. The reason I'm gonna do this is something funny happened in our Q4 quarterly call. For the first time in 16 years, nobody asked about the spot market or the term market of uranium. Didn't happen. You didn't ask, nobody asked. I don't wanna lose the opportunity to talk a little bit about what is actually a pretty dynamic market, and then let's get into some detail on some things. I'm gonna jump through a couple slides here, and I'm gonna start on this one. I think most people in the room know that uranium is the product for which there is absolutely no substitute, that nuclear utilities buy in order to then apply a bunch of services to, ultimately creating a bespoke fuel bundle that fuels a reactor. Everybody knows that. That's pretty obvious.
It's also the reason why there isn't a useful spot market of uranium. It's not a useful spot market for uranium because there is no in-year demand, fundamental in-year demand for uranium. There isn't a reactor on the planet loading a reactor fuel bundle in the next 12 to 18 months that hasn't already procured the uranium. Unlike a lot of commodities, you have a product for which there's no substitute that nobody actually needs in-year. Reactors and utilities are buying their material forward under term contracts. That's where the real market lies. What do we know about that market? Well, if we think about the demand, there's two really important aspects of demand. On the left-hand side of the screen is the stock of demand. We call this the uncovered requirements wedge.
The uncovered requirements wedge is simply, what is the amount of material that utilities have not bought yet? What do we know about the uncovered requirements wedge? It's never been bigger. At no point in time has there been more forward demand for uranium that has not yet come to the market. That's pretty exciting for an incumbent producer of uranium. That's a pretty strong signal that a lot of demand has to come. It has to come in the form of long-term contracts. The second thing about demand that we always wanna track is, what's the flow of demand? Here's a really interesting observation: utilities have been buying less than replacement rate levels of material since 2012. At no time since 2012 have utilities collectively bought what they've consumed off old contracts, which is why the uncovered requirements curve keeps growing.
The longer they stay below replacement rate, the higher the uncovered requirements go. What's exciting about that is it means that not only is there a lot of demand coming to the market that has not yet shown up, but it also means that utilities are not building up inventory. By definition, they're drawing down those stocks of supplies, 'cause that's the only way for 12, 14 years you could be below replacement rate contracting. What's exciting about that especially is because we know real price formation in our industry happens at or above replacement rate. Those are the really strong pricing moments in uranium. For us, the demand story looks really, really strong. We look across at the supply story, and that's on the right-hand side of the screen, we tend to see a supply stack that we believe is overstated.
We believe it's overstated by, by design, by disruption, and by default. What I mean there is if you look at that primary supply stack put out by UxC, it assumes everybody's running their current productive capacity at full capacity. We're not. We have 30% of our licensed capacity shut in right now, 'cause Kazatomprom is not running their, their assets at full capacity. We know that the existing capacity is not running at full capacity. We also know that by disruption, that really doesn't represent the real case for uranium supply, because that's a global view, and we know that there has been dislocations and disruptions to the supply of uranium. Look no further than Niger. Our friends at Orano had a mine taken away from them. A mine in Niger that used to provide fuel to the Western world is not doing it anymore.
By design, by disruption, and I would say by default, there's a lot of planned supply in that primary stack that, like it or not, is not going to show up in accordance with the Definitive Feasibility Studies. It just isn't. The uranium industry hasn't figured out something any other mining industry hasn't figured out. There will be delays, and there will be cost increases. We see a supply stack that tends to be overstated and a demand stack that tends to be understated, and that's pretty exciting for us. What that means for pricing is that this market is evolving very quickly. On very limited fundamental demand, we're already at $90 long-term price of uranium. We have never been at this kind of uranium price on the front end of a contracting cycle.
We have never been at this kind of uranium price with so little fundamental demand below replacement rate. Actually, the long-term price of uranium that you're looking at today is only 30% of the market, right? That long-term price is only influenced by the volumes of uranium that are contracted for on base-escalated terms. In 2025, 70% of the volumes that were contracted, were contracted on market-related terms, and market-related contracts don't inform the long-term price. What is 70% of the market telling us? It's telling us we're already at three-digit uranium. If you look at market-related contracts, and you look carefully at what we disclosed in Q4, we pushed up the upper end of our price sensitivity table to $160. Why?
We are now signing contracts that are, the ceilings are going into that range, so we had to move our price sensitivity table up. If you look at floors escalated in the mid-$70s, and you look at ceilings that are in the $150s and higher, the midpoint is already nearly $120 uranium. We know in our market that long-term fixed price eventually makes its way to the midpoint of the market-related contracts, the midpoint of the floors and ceilings. This market is already telling us a lot. It's telling us there are a lot of utilities who understand there's a supply-demand gap.
There are a lot of utilities that are willing to effectively pay three-digit uranium when you look at the distribution through the floors and the ceilings. This is on the basis of demand that isn't even at replacement rate yet. That is a really exciting development. We've been in these markets before, we've seen them before. This is precisely why we're disciplined, because we think there's a reckoning coming. As folks understand that supply stack is based on perfection that will not be achieved, and they look at a demand stack that we think has more opportunity for upside than downside, that gap is bigger. The only way to fill that gap is higher prices. Higher prices are going to take resources today, convert them into reserves, and generate investment. Today, we're out of $20 uranium. We're out of $40 uranium.
The world's running out of $80 uranium. We have to structurally move to the next price point on the uranium cycle in order to make sure the supply is there. As long as utilities treat fuel and uranium as a long lead item, then we will have no problem transitioning to a higher growth model in the nuclear industry. We're very, very excited about it, and we can't believe we went through an entire quarter where nobody asked about the price. Thank you. I wanted to just make that point, and happy to get to your questions.
Excellent. Thank you. Well, my first question is gonna be around the uncovered uranium requirements, because, you know, we've made similar points to, to investors when we're talking about uranium that, you know, that is building. We saw a pickup in contracting in the last quarter of last year, but the rest of the year was pretty low. Why, why, why is that the case? Why haven't utilities gone to replacement rate contracting yet?
Yeah, if there's not a short answer to this, but I'll, I'll try to be a little bit brief. If we had all our fuel buyers in one room, the reality is, not a single one of them doubts this gap. They all understand that the uranium price needs to go up in order to incent this gap between supply and demand. Just 100% of them believe it's somebody else's problem. They, they believe that they know the market too well, they know the suppliers too well, and they will never get caught out paying the highest price for uranium. Why is that? Because they typically view uranium as the most ubiquitous part of the fuel cycle. They view fabrication as really scarce.
There's only a handful of assets that you can send your fabrication service through, We happen to have a position in a bunch of those. There's only a handful of enrichment facilities. There's only a handful of conversion facilities. They look at uranium and they go, "Ah, there's lots of producers," They historically haven't been very disciplined, Some of them love to sell into the spot market, That's good for destroying price formation. They just expect that to continue, They just worry less about uranium while they're buying backwards, starting with the services and getting to uranium. A couple of things happened towards the end of the year. One, we announced a big deal with the U.S. government to spend a minimum $80 billion stimulating the build of AP1000s in the United States. Why was that impactful?
That announcement alone, if you think about 10 reactors on a 10-year basis, with the initial core plus the fuel that you need, that's 65 million lbs of uranium demand nobody was thinking about, that suddenly got announced. That's just a 10-year window, right? That's a lot of uranium. A couple of weeks later, there was a rumor that was leaked in the market that we had a big contract that we were negotiating with the Indians. We, we didn't leak it. We neither confirmed nor denied it, but it reminded the market that there's a lot of sovereign demand out there that's not always reflected in public RFPs that you can track. That created some momentum at year-end, and folks that had been negotiating contracts found some urgency to complete.
I would say 2026 has started off very strong. There is a lot of on and off-market uranium activity going on, reflecting again in the term price going up, floors and ceilings continuing to rise.
Well, let's turn to the MOU. you know, that obviously a hugely significant event, not just for Cameco, but for the wider industry. yeah, we're, we're awaiting finalization of that, and maybe you can just talk through, you know, what you're expecting in terms of timing and, and/or, you know, what could the initial long lead item list look like?
Yeah. In terms of finalization, we announced at the term sheet level because it was a binding term sheet, which is pretty unusual in our business, which means the term sheet is in place until the definitive agreement gets signed. It's business as usual. We're continuing to march forward. The activity that has happened since can really slot into three buckets. The first is, the U.S. government has a kind of understood that if they're trying to achieve the executive order from May of last year that said 10 large nuclear power plants must be under construction by 2030, not completed, but under construction by 2030-...
If the government waits and picks all the sites and figures out the model that they're going to be built under, and then orders long lead items, there's no way anybody's going to achieve this goal of having 10 under construction by 2030. They've effectively separated the ordering of long lead items from the process of figuring out where the reactors are going to go and the model they're going to be built under, and in addition, putting the financing in place, whether that financing is going to come through the Japanese route or through the classic Loan Programs Office route of the Department of Energy, there's optionality there. Those are kind of the three big projects. We're obviously heavily involved in the long lead items. That's a, that's a procurement contract with Westinghouse. What are the big long lead items?
Things like the reactor pressure vessel, the steam generator, the two reactor coolant pumps, the instrumentation and control module, the brains and veins of an AP1000, as well as the steel structural floor plates. If we were scoping in the turbine, the turbine would definitely be a long lead item. Then we're, of course, at the table banging our fist and saying, "Fuel has to be a long lead item, too," and reminding everybody of that. That process is underway, and we've got a lot of momentum figuring out what it would look like to order the kit for eight to 10 reactors all at once. We actually are hopeful that that will be a 2026 type of announcement about our partnership.
Figuring out exactly where they're going to go and the model they're going to be built under, we're only involved around the edges on that. There's other obviously political considerations, and we're not directly involved in that. Then, of course, on the financing side, if it comes via the Japanese route, fine, but if it ends up being some of the, you know, $250 million of already appropriate funding under the Loan Programs Office, now called the Office of Energy Dominance Financing, that's fine too. I mean, we're not going to discriminate on where that financing comes from. A lot of momentum is continuing behind this project, and more importantly, it's created a contagion effect.
You know, I think before we announced this, we had a number of utilities who were kicking the tires on AP1000s in a very serious way, but there was often a, a sense that, well, if we go first, don't we have more leverage when we negotiate? Because, you know, you really want to see AP1000 started, so, like, what are you prepared to do? This project was announced, and suddenly somebody who thought maybe they were negotiating for the first two are saying, "Well, am I now 11 and 12, or am I, am I behind not only the U.S., but also Poland and Bulgaria? Am I actually 16 and 17?" It's created an urgency to get into the supply chain sooner, which is exactly the type of contagion effect we wanted to see. The AP1000 is the best-in-class Generation III gigawatt-scale reactor, period.
Maybe we can just turn back to uranium. I think, you know, the update a few weeks back, we saw McArthur River, there's a few more challenges into this year, sort of, and the, the tail end of last year. You know, what are they, and when do you expect to kind of get through that, slightly more challenging ground?
Just a bit of context from a production point of view. In 2025, we produced 34 million lbs of uranium on a 100% basis. That's a lot of uranium. You know, even with McArthur at 15 million lbs, it's still the second largest mine on the planet by a long shot, right? Our guidance this year is up to 17 million lbs of McArthur, and historically, it ran at 18. We're not talking about a big difference here, but we are talking about a market that is not yet rewarding us for taking heroic efforts to advance production. We're not at replacement rate contracting. There's a big wall of demand yet to come to the market. Why would we front run this?
We announced in September of 2025, we've had some delays to development zones at McArthur River. Effectively, what you're seeing is just we're not trying to buy back time. The most expensive thing in mining is try to buy back time, and because the market right now is not telling us to push, we're not pushing. We're just simply working on the schedule that was started in September of 2025 when we reset it. We're not trying to advance it. We're not trying to get out in front of it, and it's just taking a bit more time, and if the market suddenly brings more demand, then we will put more effort into it. It's not new. It's not new challenges, not new complications.
We are just very disciplined, and discipline means being patient with your contracting and driving floors and ceilings higher, but it also means being patient with your production because nobody in this business has ever been rewarded for front-running demand with, with, with supply. Nobody has. They've never rewarded their owners for doing that.
One of the comments you made when you were talking about Westinghouse and long lead items was talking about fueling. Now, you have some assets in the U.S. that are on care and maintenance. Could you see a situation where, you know, this, the MOU drives the restart of those assets again for you?
Yeah. There, there is no doubt that when we look across, and I said this earlier, 30% of our already licensed, already permitted, already built production capacity is in some form of either supply discipline or care and maintenance, because the market hasn't just rewarded us for bringing it back. What Alex is referring to is our U.S. mines. We also have a mine in northern Saskatchewan, the Rabbit Lake mine. Together, those two could produce 7.5 million lbs-8 million lbs a year on a 100% basis to our account. No licenses, no permits needed. Capital's already in place. We would just have to catch up on capital we haven't spent while it's in care and maintenance. Very attractive optionality in brownfield leverage. Ultimately, we think about our tier two assets as competing with somebody else's greenfield, right?
What we'll do is we'll see a market that eventually discovers that midpoint in the market-related contracts, the three-digit uranium. When we see that, we're gonna see capital really being allocated to greenfield. I don't know exactly when that's gonna happen, and I don't know exactly what that price is gonna be, but it's not my job to guess it. When we see that start to happen, we're just gonna go to utilities, and we're gonna say, "We've got an alternative proposition. You could take a chance on a greenfield project, probably in the hands of somebody who's never done it before, who's proposing a novel technology, which sounds like a, a triple first-of-a-kind risk to me, or for that kind of price, we would bring back an already existing Tier 2 asset that has a history of reliability.
By the way, if there's any delays to it, we can back it up with other production and inventory. We've seen that before in this cycle. Rabbit Lake was down. Rabbit Lake was down in the late 1990s. We brought it back in the early 2000s when uranium went from $7 a pound to $19 a pound, on its way to $136 a pound. What did we learn? We learned that we brought Rabbit Lake back too soon. Rabbit Lake in the U.S., we look at that kind of optionality. This market will eventually pay for greenfield, and when it does, we're happy to take greenfield pricing over brownfield leverage, but we're not gonna front-run that.
Okay, maybe turning to conversion, Cameco is a big player in the conversion market. I would say a few years ago, it was quite a, quite an ignored part of the portfolio, actually, whereas right now, you know, the number of questions I'm getting has, has increased significantly. Maybe you just talk about what Cameco does within the conversion market and the opportunities you, you see there.
There's a really good analog between what's going on in conversion and what happens in uranium, so there's a, you know, it's worth spending a bit of time on. Conversion is at historic pricing. Why? Because for many years, all that secondary supply that came to the market was in the form of UF6, the DOE inventory. The Megatons to Megawatts material that used to come out of the Russian HEU agreement was already converted. As the world began to replace it, it realized that it was replacing it with fresh uranium that needed to be converted. We, we kind of hid that fact when we had all this Russian secondary supply in the market, As soon as we started worrying about Russian secondary supply, the troubles in conversion hit.
Now conversion is at historic pricing and will stay historic for some time. Why? Because out of the four Western conversion facilities, none of them are running at full capacity yet, and one is actually in care and maintenance. It's a Westinghouse facility in, in the United Kingdom. The biggest facility running in the West is ours in Port Hope. We own it on a 100% basis. The analog to the uranium sector is, you only get one chance to price new capacity. You only get one chance, so do not squander it. What do I mean there? We would have no problem, Alex, signing long-term, historically priced contracts to restart the Springfield plant in the U.K. for three to five years. Because the utilities want to incentive to come back and therefore have more capacity for the second generation of contracts.
We won't fault for that. For us, the price is fine. We just don't see the tenor of the contracts yet being sufficient. They need to be stretched out to 10 or 15-year contracts. You really need to take advantage of the one moment that you have to price new capacity. Same for uranium. If you've got a brand-new uranium project, you only have one chance to price it and get the tenor that you want, as well as the price. If you go with too short of a contract and think you're gonna renegotiate it higher the next time, you're just gonna be competing with yourself. The nice thing about our position at Cameco is, the longer the Springfield plant is down and hasn't been restarted, the more value accrues to us on a 100% basis at Port Hope.
It used to be an unloved sector. We warned people that if you fall asleep on conversion, it's gonna be a pinch point. It is now a pinch point, and we're gonna, we're gonna extract as much value of that critical investment that we possibly can. Price is there, tenor is not there yet.
C- could you see a situation where, if you don't bring on that capacity, because you're not incented to, to do it, that, you know, some of this enrichment capacity that's coming on could take the business essentially via underfeeding and just a push out in enrichment capacity over forcing more of the natural uranium through the conversion cycle?
It'll, it'll be all of the above. You, you still need enrichers to go back to a big gap between their operating tails and their contracting tails, which is what they want to. Enrichers want to enrich. They don't want to underfeed, they don't want to overfeed, but, but that is part of the investment that could be made, but you still need fresh conversion to come back. You know, the example we use is when Constellation made the decision to restart the Crane Clean Energy Center at Three Mile Island. They didn't do it on spec 'cause the electricity price went up, and they didn't do it for a three-year or a five-year contract. They did it with a 20-year PPA from Microsoft with an evergreen clause at a premium. My question is simply, why should we look at existing facilities any different?
We should look at existing facilities from the exact same lens. If you want them to come back, they have to come back under a very supportive contracting environment, and we're absolutely happy to do it.
Great. Well, time's up, but thank you very much for joining us.
Thank you very much.